UNIT 2 Outcome 2b - International Trade

Balance of payments

This records the various types of transactions between a country and the rest of the world over a period of time.

Net goods or Balance Of Merchandise Trade

This is the difference in total value between export credits for goods or merchandise sold overseas minus import debits for goods purchased from abroad

Net services

This is the difference between the value of service credits received by Australia minus service debits paid abroad

Net primary incomes

Transactions in the BoP that classify as income from the ownership of assets or resources

Net secondary incomes

These are different from other transactions in the BoP in that they are a one-way transaction with nothing exchanged in return.

Trade liberalisation

This is a government policy that entails reducing protection of local industry by cutting tariffs, subsidies and import quotas, and the signing of FTAs.

Trade protection

This is a government policy that involves using high tariffs, import quotas and subsidies to local producers to support local industry so that it can compete with imports.

Current account deficit (CAD)

Occurs when the value of all current account debits exceeds the total value of all current account credits for goods, services, primary incomes and secondary incomes, measured over a period of time.

Exchange rate

Is the number of units of another currency that can be purchased with or swapped for one unit of our currency.

Foreign exchange market

A market where currencies are swapped or converted into other currencies.

Depreciation of the exchange rate

Occurs when the value of a nation's currency falls against another currency.

Appreciation of the exchange rate.

Occurs when the value of a nation's currency rises against another currency.

International competitiveness

This means that Australian businesses are relatively efficient in their use of resources, and can compete or sell their goods and services both here and in markets around the world without relying on government protection.

Economies of scale

A method by which fixed costs can be reduced by increasing the number of units produced

Exports

Australian-made goods and services sold to other countries

Imports

Foreign-made goods and services bought by Australian economic agents

Intermediary goods

Inputs used in the production process

Comparative Advantage

the ability to produce a good at a lower opportunity cost than another producer

Tariffs

Taxes on imported goods

Quotas

restrictions on the quantity of specific products that may be imported from foreign countries

subsidies

Financial support from the government

infant industries

Developing industries that require protection to get started.

Protectionist policies

Measures designed to reduce foreign products coming into a country but give an advantage to domestics firms to sell products at home or export products

Free Trade Agreements

Agreement between two or more countries to establish a free trade zone where goods and services can be exchanged across borders, without restrictions (such as tariffs).